1. Introduction

With increasing inequality across many countries in recent decades, some social groups might be suffering greater deprivation than others. Identifying such groups is important because reducing inequality can be more effective through policies that directly target these social groups rather than specific individuals. This paper first develops a methodology to estimate the average deprivation suffered by various social groups. It then applies this methodology to measure relative deprivation in China, taking into account China’s impressive but uneven growth among different social groups. Given the high level of inequality, there is a great urgency in measuring the sufferings of different social groups. Only when these are better understood, can better policies can be applied to target the severely suffering groups and reduce inequality.

China was seen as an egalitarian country before the reform started in 1978, since then, the household income rose significantly with Gini coefficient increased from 0.30 in the early 1980s to 0.465 in 2017 (NBS). Though much attention has been devoted to the level of income inequality (Ravallion and Chen, 2007; Li et al., 2011) and other dimensions of inequality (Wang et al., 2013; Li and Sicular, 2014), little research has focused on relative deprivation. While inequality increased overall, it varies across different sectors and across different social groups, because factors such as migration, regional economic development, the social security system, and educational attainment are different. (Gustafsson et al., 2008; Wang and Piesse, 2010) even with everyone in the society experiencing the same income inequality, the extent of relative deprivation faced by each individual or group may vary (Wagstaff and Doorslaer, 2000; Subramanian and Kawachi, 2004; Subramanian et al, 2009).

Relative deprivation refers to the concept that people compare themselves with other individuals or groups to evaluate how they are disadvantaged to others in income, consumption, possessions, or other dimensions of living standards such as education, health, geographical location or other basic services (Kakwani and Son, 2016). For example, an individual may feel relatively deprived if s/he does not have certain desirable things while an increasing proportion of persons in society have that (Runciman, 1966). Therefore, the total relative deprivation suffered by her/him is her/his aggregated deprivation in all pair-wise comparisons with respect to others who are better off than her/him. In other words, as Stouffer et al. (1949) pointed out, the core of relative deprivation is social comparison.

Sen (1974, 1976) was the first to measure deprivation on the basis of all possible pair-wise comparisons. Sen argues, “in any pair-wise comparison, the man with the lower income can be thought to be suffering from some depression on finding his income to be lower”. Assuming that the deprivation suffered by individuals is in proportion to the difference between the incomes compared, the average of all such deprivation is the mean income multiplied by the Gini coefficient (Kakwani et al 2019). Yitzhaki (1979, 1982) and Hey and Lambert (1980) further proved an existing link between relative deprivation and the Gini index. Kakwani (1984) proposed a relative measure of deprivation which can be derived from all pair-wise comparison, on the assumption that rather than the absolute difference, the deprivation suffered by individuals is the proportional difference in income share. Then the average deprivation suffered by the society refers to the Gini index.

Human beings are diverse in terms of their characteristics (Sen, 1992). They differ by age, gender, education level, occupation, and ethnicity, among others. Given these differences, a population can be classified into various social groups. These differences in individual characteristics should therefore be accounted for in the analysis of inequality. China has been experiencing multi-dimensional inequalities including income inequality, some groups might be suffering greater deprivation than others. (Wang et al., 2013)

This paper uses a methodology to estimate the average deprivation by various social groups and to identify particular groups with greater deprivation. Identifying such groups is important and especially useful in addressing inequality for the society as a whole. By using a large and national-representative survey-- five rounds of the Chinese Household Income Project (CHIPs), this paper links relative deprivation based on the theories of relative utility to study the welfare implications of inequality among social groups.

This paper contributes to the literature in the following ways. First, it deepens the empirical understanding on relative deprivation in China and helps to identify particular social groups with greater deprivation in society. From a policy perspective, our findings can be used to directly target those more deprived social groups rather than specific individuals to increase policy effectiveness in reducing inequality. Second, by utilizing five waves of the representative household survey, we are able to estimate the relative deprivation among different groups across three decades of the reform period in China. We can quantify the achievements of urbanization, development of west area and education expansion in reducing income inequality, and point out existing concerns.

The rest of the paper is organized as follows: section 2 reviews the literature on relative deprivation. Section 3 explains the methodology employed. Section 4 introduces the data we use. Section 5 presents the empirical analysis of the relative deprivation among different groups in China. The last section concludes and discusses policy recommendation.